Discussion and 2 replies

Graded Discussion Week 5

Please note  that if you edit your initial response (Original Post), you will not  get  credit for the Original Post. The discussions are set up as “Must  post first”.

EVALUATION OF P/E RATIO

Step 1: Read the articles. These articles contain examples  of evaluating P/E ratio. You will be using these examples to answer the  questions listed at the bottom of the topic description.

1)      Does Chicago Rivet & Machine Co’s (CVR) PE Ratio Signal A Buying Opportunity?  by Kelly Murphy, Simply – Wall St. October 5, 2017

2)      Is Cynergistek Inc’s (CTEK) PE Ratio A Signal To Buy For Investors? by Mary Ramos Simply, Wall St. October 5, 2017

3)      Does Katana Capital Limited’s (ASX:KAT) PE Ratio Signal A Selling Opportunity? by Kyle Sanford , Simply Wall St. October 5, 2017

You must use the company assigned for you for the project.

Your assignment:

Please also note that your answers should be written in your own words. Don’t use quotes from the articles.  

You  are expected to make your own contribution in a main topic as well as  respond with value added comments to at least two of your classmates as  well as to your instructor.

For this question we will be using P/E ratio.

To find a company’s P/E ratio, use www.morningstar.com , enter the desired stock symbol to get to the company’s front page.  The P/E ratio is listed on the company’s front page.

Compare  the P/E ratio of your company with the industry average or with major  competitors. Is there a difference between these numbers? Is the stock  overvalued, undervalued, or properly valued? Why?  In accordance with  your findings, is it reasonable to buy the stock? Please explain your answers.

Reflection – the students also should include a paragraph in the initial response  in their own words reflecting on specifically what they learned from  the assignment and how they think they could apply what they learned in  the workplace. 

Post by Tyler Hickman

                 My company is Target Corp. which is known as a great stock to have in  the market. The competition for Target would be Walmart Inc., Dollar  Tree Inc., as well as Dollar General Corp. Price-to-Earning Ratio is for  valuing a company’s current share price relative to its share earnings  per share. It can be used to compare a company to another company or the  history of the company to determine if it is a good or bad share or if  the company is going the right direction. It is always good to have a  P/E ratio otherwise the company is having no earnings or losing money.  When a company has a high P/E ratio then it is looked at to have high  earnings in the future or potentially overvalued. When a company has a  low P/E ratio then it is the opposite, the company could be undervalued  or is doing better than the past of the company.

                Target Corp. has a P/E ratio of 21.84 which is higher  than some of the competition and lower than others. Dollar Tree Inc. is  a P/E ratio of 20.71, Walmart Inc. has a ratio of 29.51 and Dollar  General Corp has a P/E ratio of 20.32. Target is pretty average compared  to the competition. I would say that at this time Target Corp. would be  overvalued due to the price of the stock trading at $205.76 with a P/E  ratio of 21.84 compared to one of the top competitors, Walmart Inc.  trading at the price of 140.16 with a ratio of 29.51. This would mean  that you would have to spend less money to make money with Walmart Inc.  than Target Corp. Dollar Tree inc. is the same way with a price per  share at $117.02 with a P/E ratio of 20.71 where this would be a better  deal for making money back than Target. The one competitor that Target  Corp. beat is Dollar General Corp. who has a higher price than Target  and a lower P/E ratio.

                I do find it reasonable to buy Target Stock at this  point. It is a safe option that makes money with not much chance of  failing. The price is on the higher side per share but can make money as  well.

References

Fernando, J. (2021, April 09). Price-to-earnings ratio – p/e ratio. Retrieve from

Morningstar, Inc. (n.d.). Retrieved from

POst by Craig Steward

Microsoft has a P/E ratio of 31.75 compared to the computer software  industry average of 38.51. There is a difference between the numbers, as  Microsoft’s P/E ratio is lower than the industry average. Since  Microsoft’s P/E ratio is lower than the industry average’s P/E ratio, it  is therefore undervalued. According to the articles, the P/E ratio  alone will not tell you if it is worth buying. They suggest looking at  the PEG ratio and EV/EBITDA to get the stock’s complete picture. The PEG  ratio and EV/EBITDA are 2.35 and 24.80, respectively. It is not  reasonable to buy the stock based on those numbers, as they suggest the  stock is overpriced.

I learned about a new website to get financial information on companies. I have never heard of morning star.com before,  and it will be a new tool that I will use when investing in companies. I  learned what the P/E ratio is and calculated it by dividing the share  price by earnings per share. If the P/E ratio is higher than the  industry average, then the stock is overvalued. If the P/E ratio is  lower than the industry average, then the stock is undervalued. Looking  at the P/E ratio alone does not tell the buyer if the stock is worth  buying. The buyer should look at the PEG ratio and EV/EBITDA. If the PEG  and EV/EBITDA values are high, the stock is likely overpriced and  should not be purchased. 

I can use the information in this discussion in my future workplace.  If I have clients who want to buy stocks, I can look at the P/E ratio,  PEG ratio, and EV/EBITDA to determine if it is worth buying. Then I can  properly advise the clients on potential risk if the stock is purchased  or if it is an excellent stock to buy.